ASIC will not just mimic international efforts to impose stricter regulations on the hedge fund sector, but will instead take a more principle-based approach, ASIC chairman Greg Medcraft has said.
"The US and Europe have taken a very prescriptive approach to hedge fund regulation," Medcraft told the Australian Hedge Fund Forum 2011 yesterday.
"I think it is a very important message from me that while our approach should be informed by emerging international regulatory norms to guard against arbitrage and secure mutual recognition, our preferred approach is to focus on equivalence in outcomes and not in equivalence of mechanisms."
He said although the global financial crisis (GFC) made it clear hedge funds were flying under the radar of regulators, those funds could not be blamed for the downturn.
The crisis clearly focused international and national attention on hedge funds and their regulation, but while it remained unclear what role hedge funds played, the GFC was not a hedge fund crisis, he said.
"What was clear was that as the crisis unfolded, hedge funds had largely passed under the regulatory radars and regulators needed to address this lack of attention," he said.
ASIC was currently focused on valuation mechanisms of assets, he said.
"One area where we clearly focus on at the moment is valuation practices, particularly those in relation to hard-to-value assets," he said.
In a submission to the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into the collapse of Trio Capital, the regulator proposed regulatory changes in relation to registered managed investment scheme asset disclosure, while it said it would also seek to exclude certain complex schemes from issuing short form product disclosure statements (PDS).
"We are concerned that the short form PDS does not give adequate disclosure," Medcraft said.
The Australian Hedge Fund Forum was held in partnership with the Alternative Investment Association (AIMA) Australia, which took the opportunity to introduce guidelines for hedge funds.
An advisory committee to AIMA, made up of institutional investors, released a set of principles for investing in hedge funds.
"We would like to see higher operational standards accepted in the hedge fund industry, both locally and overseas," committee chairman Bruce Tomlinson, who is also portfolio manager at Sunsuper, said in a statement.
The principles cover four areas: governance, fund operations, business management/operations and risk management.
"The hope of the committee is that, over time, consistently high standards will be adopted across the hedge fund industry," Tomlinson said.
